This new series will be a mix of practical resources created by our partners combined with farmer stories and useful tips. We are pulling information from branding experts, food safety and value-added food specialists, experienced vegetable and livestock farmers, and farms of all sizes developing their marketing and sales strategy.

To kick things off, we’re discussing the importance of choosing the right mix of sales channels for your operation. There are many issues to consider and many different channels to get your product to the final end-consumer.

Read on as we help you think about your strategy, how to choose the channels that will work for you, and – most importantly – maximize your profit!

Balancing Multiple Channels

In general, selling direct-to-consumers is the most profitable channel because you keep the entire final purchase price. However, the larger your production volume, the more difficult it can be to move all of your product as it is harvested.

Selling through wholesale channels may seem appealing because you can move a lot of product in one transaction, but there are administrative and regulatory costs and hurdles. This can be overwhelming at times, and – in general – smaller farms, that don’t have economies of scale, have profit margins that are much lower and it is often unsustainable.

Below is a graph created by the Sacramento Area Council of Governments (SACOG), which illustrates the balancing act farmers go through in choosing the best mix of sales: direct-to-consumer, high-end wholesalers, or conventional wholesalers.

SACOG: Regional Planning in the Sacramento Region, 2012

For 20-acre farms selling:

100% direct-to-consumer,net revenue was $100,000.

65% direct-to-consumer and 35% to high-end wholesaler,net revenue was $40,000.

Ultimately, choosing the right mix of sales channels (even if only one) should be based on sound financial planning and an understanding of your profit margins from each of your current channels. (For help with this type of planning, refer to the Business & Financial Planning Toolkit.)

On a more basic level, you should also ask yourself some easier questions as a general reality check:

To whom will I market?

Why will the market want my product?

How will the market know I have what it needs?

What will I market? What do you want to sell that will also make the biggest profit?

Would it make sense to pool product with neighboring farms to gain access to larger-volume markets?

Hi Jennifer,
Thanks for reading! This graph was provided to us by one of SACOG’s senior planners. You can contact him for more information:
David Shabazian
SUPERVISING SENIOR PLANNER
Phone: 916-340-6231
Email: dshabazian@sacog.org